Posted on 04/03/2005 6:16:32 PM PDT by BulletBobCo
NEW YORK (Reuters) - Regular gasoline pump prices in the United States may average as high as $2.50 by Memorial Day, shattering the records as futures prices climb to new peaks, analysts said on Friday.
U.S. retail gasoline is already running above $2.15 a gallon, well beyond last spring's peak of $2.05, according to government and industry surveys.
"Surging NYMEX futures are certainly an upward pressure on prices at the pump, so I would certainly expect to see retail prices move up sharply over the next few weeks," said Tim Evans, analyst with IFR Energy Services.
Gasoline futures on the New York Mercantile Exchange (NYMEX) hit a record Friday over $1.70 a gallon, keeping stride with a spike in the cost of crude as soaring global energy demand threatens to outpace supply.
While it is difficult to predict pump prices based on futures traded on the NYMEX, the increase will probably get passed on to motorists, with prices running up to $2.50 a gallon in the next month, said Ed Silliere, analyst with Energy Merchant Intermarket Futures.
The U.S. Energy Information Administration uses spot -- physical -- prices to predict retail prices, and the NYMEX is the benchmark off which spot prices are calculated, said Mike Burdette, analyst with the EIA.
U.S. average retail prices generally are 60 cents to 65 cents higher than spot prices, which on Friday were running about $1.70 a gallon in the U.S. Gulf Coast.
Friday's spot prices, Burdette said, would predict average retail gasoline prices of $2.30 to $2.35 per gallon, but only if the spot price stays put for at least several days.
CALIFORNIA TAKES THE BRUNT
Pump prices in California on Friday were 30 cents higher than the national average, according to the AAA's survey, and further spikes could send prices close to $3.
California tends to have higher prices than other states because of more stringent environmental rules governing fuel that out-of-state refiners have trouble meeting.
While soaring prices have yet to show an impact on fuel demand in the United States, that could be coming soon, IFR's Evans said. He pointed to the third quarter of 2004, when high gasoline prices helped lower year-on-year demand growth to 0.4 percent, less than the rate of population growth.
Current gasoline demand is running about 2 percent higher than last year, according to government figures.
EARLY SPIKE?
Evans said that if 2005 plays out like last year, the record high prices could hit before peak summer driving demand kicks in, and ease by July.
"Overall, I think that means we could see retail gasoline prices rise to the $2.30-2.40 level on a nationwide average, but that they would fall back to less than $2.00 by the 4th of July," Evans said.
The NYMEX front-month, for deliveries to the New York Harbor in May, settled on Friday at $1.7310 a gallon, and hit a record high of $1.7360 a gallon, with June delivery futures striking a record $1.75.
Gotta keep things in perspective though.Nothing ships or is transported using beer or cigs,or water as a fuel source for that matter.We can all talk about how the price relates to other products and inflation,but gas and diesel fuel are used in high supply,not only by those getting from A to B,but by every industry that ships a product.Not only does the price of gas go up,but the cost of everything shipped or trucked goes up as well.
I've been posting that same idea on all these oil price threads, no one else seems to like it, most freepers are embracing the "free market", which is killing us right now with respect to energy prices.
the government cannot allow speculation in energy or food. It just can't happen, those two items are off limits, and when the arbitrageurs move into those areas - affirmative steps must be taken by government to crush them. let them swap tech stocks or bonds or fine art or collector automobiles if they want to create a speculative bubble in something. right now, 20 cents out of every gallon of gas we all pump is being sent to a hedge fund or brokerage house who is playing in the oil market.
I don't have to buy bread.
Grass seed is more expensive than ever.
I don't have to buy grass seed.
Clothes are more expensive than ever.
I can wear the clothes I have until they are rags.
Everything is more expensive than ever.
This is true but I don't have to buy many of those things.
And every day that oil/gas gets more expensive its a "new record high" an endless supply of headlines for us.
I have to buy gas, no choice. Rich man, poor man, everybody has to buy gas.
Therein lies the problem...
Right, and we are talking about the necessities of life here, like food which is all shipped to each individual store by diesel or gas powered trucks which will be passing on their increased fuel costs to consumers.
When all you can afford are the necessities of life, they economy is going to start going down bigtime, while inflation keeps going up.
They called this Stagflation back when Jerry Ford was President, if I remember right.
It ain't pretty...
You really are savvy about this oil situation and your idea sounds brilliant. I wish you would contact your Congressmen and write the White House about it. And how about a letter to the Editor of some newspapers?
Just curious. Did you read oceanview's ideas? I found them very interesting!
anytime you propose any kind of government intervention to correct an economic problem here on FR - they brand you a socialist. I post this same idea time after time on these oil threads, you folks are some of the first to even reply to it (positive or negative).
just check out some of the quotes here:
http://ogj.pennnet.com/Articles/Article_Display.cfm?Section=ARTCL&ARTICLE_ID=221823&VERSION_NUM=2&p=82
notably:
"Banks having established investment banking divisions with US energy trading operations include ABN AMRO Bank NV, Bank of America Corp., Barclays Bank PLC, Citigroup, Merrill Lynch, Deutsche Bank Group Inc., and UBS.
“Banks have increased their efforts to profit from energy by trading for their own account,” Josephson said. “The banks’ current enthusiasm for energy contrasts with the mid-1990s when several scaled down their activities as investors moved into equities.”
A growing number of pension funds are turning to commodities to diversify away from equities and bonds, he said. Meanwhile, hedge funds “will continue to have a voracious appetite for energy trading.”
Peter C. Fusaro, chairman of Global Change Associates Inc., a New York energy and environmental risk management consultancy, noted that the entrance of energy hedge funds into energy commodities trading started primarily in the US. But Canada now has energy hedge funds, and energy hedge fund activity in oil trading is expected during 2005 in Europe and Asia. Hedge funds have considerable influence over markets, he said (OGFJ, 4Q 2004, p. 21).
Fusaro said that he had identified close to 300 energy funds by late last year, and he believes the “true number is much higher.”
Traditional energy companies are either exiting the trading arena or are becoming further marginalized by the activities of the hedge funds and investment banks, he added"
Oil is the new "tech stock" - But nobody put a gun to our heads to buy Cisco at 80. This time around, we all need to buy energy, and these players are getting a piece of the action everytime we fill up our cars. That's not to say hedging in this market is unacceptable - companies like airlines and others, who consume oil and are sensitive to price changes, will hedge in this market and that perfectly legitimate. But its gone way beyond that now.
Until we bust these players, and return the oil market to an equilibrium where the participants are buyers who actually want to consume oil, and sellers who actually have oil they want to bring to market, prices will rise. $100/bbl oil is possible if the trend is not broken, its just money chasing money right now.
it won't move as that article indicates without some catalyst that starts prices falling and causes speculators to be stopped out of their positions. that's why I say - open the SPR and sign a contract with Iraq for their oil below market. That's the catalyst we need to start the ball rolling.
Honda has a natural gas Civic and a special home unit they are going to introduce so that you can fill your vehicle at home. Natural gas is regulated by the PUC. The range is about 200 miles.
The higher gasoline prices go, the more I am convinced that price fixing is going on.
One example -
Here in our small town right on the interstate, Gasoline prices have shot up 22 cents per gallon in the last 3 days. Yet none of the gas station received a delivery in those days. Yet one after the other (4 within 50 yds of each other), they all raised prices - and all did it literally within minutes of each other.
The gas in they are selling from their tanks today cost them exactly the same that it cost them last Thursday.
My bicycle is already getting increase usage.
OK - so time for some real data - anyone have any inside accurate info on these questions?
1. What is the actual cost to PRODUCE the gasoline being sold TODAY per gallon?
2. What are the gasoline taxes (state gas taxes here: http://www.taxfoundation.org/variousrates.html)
I remember my parents being friends with a service station owner (you know - the type that use to have a service bay or two for mechanicing, tires, belts, etc. and had a full service island and a self service island) when I was a youngster. I vividly remember the owner saying that at the time, his prices were from 2 to 6 cents per gallon over his cost.
Anyone want to bet the margin is higher now? And that's on top of the massive mark-up on all the foods, drinks, and junk they sell at most gas stations now.
Of course, as we preach here on FR - the consumer's dollars are the right way to regulate business. Well - how many of us can or will quit buying gasoline to "send a message"? I will tell you - it's the same number that jumped on the "gas-out" day that has been semi-organized a couple of times in the last few years.
Why do I feel like I'm being robbed every time I have to buy gas? And don't give me any of the poo that gas is still a bargain - it takes a bigger chunk of my check today that it did 10 years ago. And we drive fewer miles than we use to.
Sorry that I had to end my day with out seeing your post.
There are laws against market manipulation, but know one sees the agenda of the MSN when we have GOP administrations.
When the money of the patsies begins to dry up, the paper market will back off. The Brokerages are hitting hard on the spam E-mails for new money to shore up current prices and to inflate to the paper target of $105.
Just wait until the whole blood and blood plasma supply becomes part of the Futures Market. If they can trade on the last election, then they will trade on anything.
"most freepers are embracing the "free market", which is killing us right now with respect to energy prices."
Obviously you don't understand how a free-market works or you wouldn't be advocating putting energy prices in the hands of our elected officials. That is insanity! You can't champion a free-market and then turn around and put certain items off limits.
Here's what will happen......either consumers will get fed up with the high price of gasoline and begin riding bikes, or carpooling, or buying motorbikes/small cars, etc or they will continue paying at the pump. If it's the former, then demand for gas wanes and the prices come spiraling down and voila, just like that, the free market corrected itself. And, more times than not, the free market will OVERCORRECT and we will have once again very cheap gasoline prices because the market didn't anticipate this type of consumer reaction. And if the consumers keep paying at the pump for higher gasoline prices, then the rest of us have to listen to people like you complain about the prices.
If you don't like the price of gas.....then go buy a bike or get a second job or move closer to your job or work on an invention to replace combustible engine and become rich. We all have choices!
And the President would care - why?
President Bush can't serve another term.
President Bush, in this term, is going to do what he sees as right.
He really doesn't have to care what his approval rating is.
Actually, the model for most stations is to sell gas at tiny margins and make their profits on that overpriced "food, drinks and junk". I'd venture to say retail gas margins are as low as they've ever been.
Ok.... then how to explain rising prices without new shipments of gasoline.... The cost of the gas in the tanks don't go up while sitting in the tanks, yet the price charged DOES go up....
And even if this is in anticipation of the next shipment's cost, I have a problem.
As I understand it, today's gasoline prices at the pump are based upon the current oil and wholesale gas futures markets. When the futures market increases, so will the price of gas at the pump.
This is the nature of demand and supply in a commodity market, which is generally subject to steeper peaks than other markets.
I paid $2.40 yesterday. It's going through the roof. Are the "summer blends" out yet? It's amazing they haven't reduced the amound of blends yet. That's something that could be done.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.